Is Your Life Insurance More or Less?
People have mixed feelings about life insurance. Some consider them as additional expense, while others think of them as it is—a security given to surviving family members. Life insurance is important, period. But some people don’t take time to determine how much life insurance they really need, which can be bad, whether it’s more or less. To avoid such a mistake, consider the following:
The needs of your family
It’s vital that your insurance is enough to cover the amount needed to run your household, but you shouldn’t overlook the possibility of hospital bills, loan or mortgage balance, funeral expenses, estate taxes and other stuff that has to be paid following your demise. So be sure to take all these into consideration when you buy life insurance.
Future expenses and financial obligations
Do you have money saved up for college? If not, you should include tuition fees in your calculation as well. The future is uncertain, and you could die before your children even finish high school, which is why you need to prepare for such an eventuality. Do the same for your family’s cash flow needs and other financial obligations.
Take into account all financial resources
The IRA, Social Security survivor benefits, 401(k), long or short-term savings, investments, and spouse’s income can all influence your choice of life insurance. If financial resources are abundant enough, you may not need a huge amount for life insurance. Otherwise, you need a policy that will cover all your family’s needs.
Your income can also affect the amount of your life insurance. If you can only pay as much, you won’t have a choice but to choose what you can afford. It’s a bad idea to aim for a bigger amount if you’ll end up defaulting on the payments. This is especially true if you applied for insurance when you’re already older, since age can affect your premium.